11. Income Taxes

The Company intends to elect to be taxed as a REIT effective January 1, 2013, pursuant to the U.S. Internal Revenue Code of 1986, as amended. As a REIT, generally the Company will not be subject to federal corporate income taxes on ordinary taxable income and capital gains income from real estate investments that it distributes to its stockholders. The Company will, however, be subject to corporate income taxes on built-in gains (the excess of fair market value over tax basis at January 1, 2013) that result from gains on certain assets. In addition, the Company will continue to be required to pay federal and state corporate income taxes on earnings of its taxable REIT subsidiaries (“TRSs”).

The (provision) benefit for income taxes for continuing operations consists of the following (amounts in thousands):


	2013			2012			2011
CURRENT:
Federal	$	4,528		$	(5,622	)	$	(612	)
State		(1,396	)		(1,449	)		(1,409	)

Total current (provision) benefit		3,132			(7,071	)		(2,021	)

DEFERRED:
Federal		84,918			7,415			(4,162	)
State		4,612			1,690			(1,237	)

Total deferred (provision) benefit		89,530			9,105			(5,399	)

Total (provision) benefit for income taxes	$	92,662		$	2,034		$	(7,420	)

The Company is required to distribute at least 90% of its annual taxable income, excluding net capital gains, to its stockholders in order to maintain its qualification as a REIT. The taxability of distributions to stockholders is determined by the Company’s earnings and profits, which differs from net income reported for financial reporting purposes. The estimated taxability of cash distributions to common shareholder in 2013 is as follows (per common share):


Ordinary income	$	1.39
Capital gains		0.02
Return of capital		0.09

	$	1.50

The differences between the income tax (provision) benefit calculated at the statutory U.S. federal income tax rate of 35% and the actual income tax (provision) benefit recorded for continuing operations are as follows (amounts in thousands):


	2013			2012			2011
Statutory federal income tax (expense) benefit	$	(9,035	)	$	10,034		$	(6,122	)
Adjustment for nontaxable income (loss) of the REIT		32,642			—			—
State taxes (net of federal tax benefit and change in valuation allowance)		3,216			(523	)		(3,206	)
Permanent items		1,092			(384	)		4
Nondeductible compensation		—			(2,319	)		(25	)
Nondeductible transaction costs		—			(6,632	)		—
Federal tax credits		—			542			1,330
Federal valuation allowance		(3,509	)		884			347
Unrecognized tax benefits		6,261			432			252
REIT conversion		62,063			—			—
Other		(68	)		—			—

	$	92,662		$	2,034		$	(7,420	)

As a result of the Company’s conversion to a REIT, certain net deferred tax liabilities related to the real estate of the Company were reversed, as the REIT will generally not pay federal corporate income tax related to those deferred tax liabilities. In addition, the Company assessed the need for a valuation allowance on the net deferred tax assets of the TRSs. As a result, the Company recorded a net benefit of $64.8 million related to the conversion to a REIT during 2013.

Significant components of the Company’s deferred tax assets and liabilities at December 31 are as follows (amounts in thousands):


	2013			2012
DEFERRED TAX ASSETS:
Accounting reserves and accruals	$	20,371		$	30,067
Defined benefit plan		2,305			9,614
Investments in stock and derivatives		—			539
Deferred management rights proceeds		72,125			73,011
Rent escalation		137			27,086
Federal and State net operating loss carryforwards		43,069			16,946
Tax credits and other carryforwards		2,073			1,022
Investments in partnerships		—			3,778
Other assets		10,290			10,374

Total deferred tax assets		150,370			172,437
Valuation allowance		(97,641	)		(18,347	)

Total deferred tax assets, net of valuation allowance		52,729			154,090

DEFERRED TAX LIABILITIES:
Property and equipment, net		71,700			235,403
Goodwill and other intangibles		2,650			4,244
Other liabilities		1,496			3,381

Total deferred tax liabilities		75,846			243,028

Net deferred tax liabilities	$	23,117		$	88,938

Federal net operating loss carryforwards at December 31, 2013 totaled $49.9 million, resulting in a deferred tax benefit of $17.5 million, which will begin to expire in 2032. Federal credit carryforwards at December 31, 2013 totaled $1.6 million, and expire beginning in 2031. Charitable contribution carryforwards at December 31, 2013 totaled $3.3 million, resulting in a deferred tax benefit of $0.1 million, which will begin to expire in 2014. The use of certain federal net operating losses, credits and other deferred tax assets are limited to the Company’s future taxable earnings. As a result, a valuation allowance has been provided for certain federal deferred tax assets. The valuation allowance related to federal deferred tax assets increased (decreased) $60.3 million, $(0.5) million and $(0.3) million in 2013, 2012 and 2011, respectively. The 2013 increase in the valuation allowance includes the revaluation of the deferred tax assets of the TRSs due to the REIT conversion. State net operating loss carryforwards at December 31, 2013 totaled $486.5 million, resulting in a deferred tax benefit of $25.6 million, which will expire between 2014 and 2033. Remaining state credit carryforwards at December 31, 2013 totaled $0.1 million and do not expire. The use of certain state net operating losses, credits and other state deferred tax assets are limited to the future taxable earnings of separate legal entities. As a result, a valuation allowance has been provided for certain state deferred tax assets, including loss carryforwards. The valuation allowance related to state deferred tax assets increased (decreased) $19.0 million, $(0.3) million, and $1.5 million in 2013, 2012 and 2011, respectively. Management believes that it is more likely than not that the results of operations will generate sufficient taxable income to realize the deferred tax assets after giving consideration to the valuation allowance.

The Company has concluded Internal Revenue Service (“IRS”) examinations through the 2010 tax year. For federal income tax purposes and substantially all the states with which the Company has nexus, the statute of limitations has expired through 2009. However, the Company has net operating loss carryforwards from closed years, which could be adjusted upon audit. The Company has not been notified of any federal or state income tax examinations.

As a result of the completion of the IRS federal income tax audits through 2010, issues related to 2010 and earlier years have been effectively settled. Due to the favorable resolution of the federal examination, the Company’s reserve for unrecognized tax benefits decreased by $12.3 million during 2013, of which $5.5 million was recorded as an income tax benefit. Due to the expiration of statutes of limitations, the reserve for unrecognized tax benefits decreased an additional $0.8 million during 2013, of which $0.5 million was recorded as an income tax benefit. In addition, the Company recorded a reduction to the related accrued interest of $1.5 million as an income tax benefit in 2013.

As of December 31, 2013, the Company had no unrecognized tax benefits. A reconciliation of the beginning and ending gross amount of unrecognized tax benefits (exclusive of interest and penalties) is as follows:


	2013			2012			2011
Unrecognized tax benefits at beginning of year	$	13,162		$	14,141		$	18,952
Additions based on tax positions related to the current year		—			7			—
Reductions based on tax positions related to the current year		—			—			(286	)
Additions for tax positions of prior years		—			—			147
Reductions for tax positions of prior years		—			(222	)		(3,963	)
Reductions due to settlements with taxing authorities		(12,327	)		—			—
Reductions due to expiration of certain statute of limitations		(835	)		(764	)		(709	)

Unrecognized tax benefits at end of year	$	—		$	13,162		$	14,141

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company recognized $(2.2) million, $0.2 million and $0.2 million of interest and no penalties related to uncertain tax positions in the accompanying consolidated statements of operations for 2013, 2012 and 2011, respectively. As of December 31, 2013 and 2012, the Company has accrued $0 and $2.2 million of interest, respectively, and no penalties related to uncertain tax positions.